April 16, 2019

HKMA announced that, in accordance with the Banking (Capital) Rules, the countercyclical capital buffer (CCyB) ratio for Hong Kong remains at 2.5%. This is mainly because system-wide risks in Hong Kong associated with a period of excessive credit growth have not subsided and the housing affordability remains highly stretched.

The specific CCyB requirement applicable to a given authorized institution is expressed as a percentage of its common equity tier 1 capital to its total risk-weighted assets (RWA). CCyB requirement of each authorized institution may vary, depending on the geographic mix of its private-sector credit exposures and the CCyB rate applicable in each jurisdiction where it has such exposures. The latest indicative buffer guide, calculated based on data from the fourth quarter of 2018, signals a lower CCyB of 0.75%, mostly due to the recent narrowing of the property price to rental gap from more than 10% in the previous quarter to slightly below 3%, partly reflecting the correction in the residential property prices after mid-2018.  The credit-to-GDP gap, however, remains at a significantly elevated level of over 12%. In addition to the indicative buffer guide, HKMA reviewed a range of reference indicators such as measures of bank, corporate, and household leverage; debt-servicing capacity; profitability and funding conditions in the banking sector; and macroeconomic imbalances.

 

Keywords: Asia Pacific, Hong Kong, Banking, CCyB, Basel III, Regulatory Capital, HKMA

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